DAMAT Hotel & Business College

Kara – Alo Campus

Faculty of Business and Social Sciences

FINAL EXAM - FOR ECONOMETRIC I

Instructions to the Students:

 ALL the questions are compulsory and MUST be answered.

 Use only PEN for writing answers.
 Double answers will not carry any marks.
 Switch off your cell phone
 Total mark 40 %
 Time Allotted: 1: 00 HR
Name: - ___________________________
ID No:-____________________________
Section:-___________________________.

Part I: True or False Questions

Direction: Write “True” If the statement is correct and “False” if the statement incorrect in the separate
answer sheet

1. Model is a simplified representation of a real world

2. Econometrics = Economic theory + mathematical economic
3. Stochastic error is added to a regression equation to introduce all of the variation in Y that cannot be explained
by the included X’s.
4. Econometrics means economic measurement
5. Econometrics measures the empirical value of each coefficient.
6. The assumption of homoscedasticity assume that variance of the random variable is not constant in each
period
7. Thus a stochastic model is a model in which the dependent variable is not only determined by the explanatory
variable(s) included in the model but also by others which are not included in the model.
8. Classical linear regression model has a constant variance of error term that called heteroskedasticity
9. Best linear, unbiased estimator and efficient estimator are of least-squares estimators properties.
10. Stochastic error is added to a regression equation to introduce all of the variation in Y that cannot be explained
by the included X’s.

Part II: Multiple Choices (1 pts each)

Direction: Select the best answer from the given alternative and write your choice on the separate answer
sheet.
11. From specification of the econometric model C=α + βY +∈ , which one is the autonomous consumption?
A. α B . β C . Y D ∈
12. Disturbance tem it captures several factors these factors are:
A. Omit ted variables B. Measurement error in the dependent variable and or wrong
C. Wrong functional form D. Randomness of human behavior E. all
13. Which of the following are the goals or uses of Econometrics?
A. to from econometric models then making C. Forecasting or Prediction
Analysis D. Estimation of economic relationships E. All
B . Policy making
14. What is the purpose of simple regression analysis?

A. To test the hypothesis that two variables are not related.

B. To estimate the relationship between two variables.
C. To calculate the standard deviation of a variable.
D. To determine the optimal level of output for a firm.

15. Which of the following statements is true regarding economic models?

A. They are based on empirical data.
B. They are used to describe the relationship between economic variables.
C. They use statistical methods to estimate parameters.
D. They are only used to make predictions.
16. Which of the following is a limitation of economic models?

A. They are based on empirical data.

B. They are too complex and difficult to understand.
C. They only consider a limited number of variables.
D. They are objective and unbiased

17. Which of the following is an example of an econometric problem?

A. Estimating the parameters of a linear regression model.
B. Deriving the production function for a firm.
C. Solving a system of simultaneous equations.
 D. Determining the optimal level of output for a firm.

18. Which of the following is an example of an econometric problem that involves time-series data?
A. Estimating the coefficients of a linear regression model.
B. Testing the hypothesis that two variables are not related.
C. Deriving the production function for a firm.
D. Finding the optimal level of output for a firm
19. What is the slope coefficient in a simple regression model?
A. The change in the dependent variable for a one-unit change in the independent variable.
B. The change in the independent variable for a one-unit change in the dependent variable.
C. The correlation between the independent and dependent variables.
D. The standard deviation of the dependent variable.
20. What is the intercept in a simple regression model?
A. The value of the dependent variable when the independent variable is zero.
B. The value of the independent variable when the dependent variable is zero.
C. The correlation between the independent and dependent variables.
D. The standard deviation of the dependent variable.
21. Which of the following is the equation for a simple regression model?

A. Y = a + bX C. Y = a – bX
B. X = a + bY D. X = a - bY

22. What is the main purpose of a simple regression analysis?

A. To explain changes in the independent variable
B. To estimate the relationship between the independent and dependent variables
C. To predict the future value of the dependent variable
D. To calculate the standard deviation of the dependent variable
23. What is the method used to estimate the parameters of a simple regression model?

A. Maximum likelihood estimation C. Bayesian estimation

B. Ordinary least squares estimation D. Bootstrap estimation

24. What is heteroskedasticity?

 A. The condition where the variance of the residuals is not constant across the range of the independent
variable
B. The condition where the residuals are normally distributed
C. The condition where the residuals are not correlated with the independent variable
D. The condition where the residuals are not correlated with the dependent variable
25. What is autocorrelation?
A. The condition where the residuals are correlated with the independent variable
B. The condition where the residuals are correlated with the dependent variable
C. The condition where the residuals are not normally distributed
D. The condition where the residuals are correlated with each other
26. What is the purpose of using dummy variables in regression analysis?

A. To control for multicollinearity. C. To correct for heteroscedasticity.

B. To represent categorical variables. D. To test for autocorrelation.

27. What is the logistic regression model used for?

A. To model binary dependent variables. C. To control for multicollinearity.

B. To model continuous dependent variables. D. To correct for heteroscedasticity.

28. In a regression analysis the expression BULE stands for?

A. Best , Linear , Unbiased, Estimator C. Biased, linear, unit, Estimator
B. Bohr’s, linear unbiased, Estimator D. Best, linear, Unit, Estimator
29. One of the following is a problem in a regression which arises when some or all explanatory variable are
perfectly linearly correlated each other
A. Multicollinearity C. Hetroskadsticty
B. Autocorrelation D. Normality
30. The fitted regression equation is given by Y =−12+ 0.5 X , what is the value of the residual at the point X = 50
and Y = 70?
A. 13 B. 42 C. 57 D. 29
31. One of the following is not a component of the BULE property of the OLS estimations
A. Linearity C. Efficiency
B. Unbiasdness D. Maximum Variance
32. In the linear regression model: y=α + βX +U ,the variable ‘X’ is said to be a (an) :
 A. Regressand C. Endogenous variable
B. Explanatory Variable D. Dependent Variable
33. E ( Ui , Uj )=0 ,W h eni ≠ i, is termed as,
A. Hetroscedasticity C. No Auto – Correlation
B. Multi – collinearity D. Homoscedasticity

III. Fill in each of the blanks

34. . Given equation Y =α + βX +∈ , from the given equation , what is
i. Independent variable ________________
ii. Parameters ________________ and __________________
iii. Dependent variable ___________________
iv. Intercept term _______________
v. Slope _________________
vi. Disturbance term (Error term) _________________

Part IV: Discuss briefly

35. List the properties of OLS estimators blue and describe it ?

ANSWER SHEET

NAME_________________________________ID No_______________

True/False Choice
1 11 21 31
2 12 22 32
3 13 23 33
4 14 24
5 15 25
6 16 26
7 17 27
8 18 28
9 19 29
10 20 30